Net Neutrality and the Impact on Your Business

In December 2017, the US Telecommunications Commission (FCC) just stripped the regulatory framework for network neutrality. So, what does that mean and why should it interest you? We will show you why every company is affected by this discussion.


Here you will find a comprehensive report on the end of net neutrality in the USA in the ZDF media library. You can also read in this Zeit article how the decision can influence the separately anchored European net neutrality.

Let's start at the beginning. Net neutrality basically means the equal (neutral) transmission of data on the Internet. Access to data shall not be discriminated against. However, this neutrality can be realized on different levels. In a so-called egalitarian network, all data is treated equally. The type of sender, platform or receiver influences the transmission.

Not for all services, however, the fully egalitarian network is optimal. Some services can't handle delays very well, but only require a small volume of data (e.g. chats or telephone services). Others, by contrast, can cope with delays, but simply need more data volume (e.g. video providers). Net neutrality can therefore also be defined in a broader sense for specific applications. Similar providers, such as all online shops, are treated equally. A distinction is made, nonetheless, between the services. With this variant of net neutrality, different demands can be met.

Why is that even important? Internet providers are confronted with ever increasing data streams. This growth can, of course, be countered by expanding the network - or by transport at different speeds. In this context, things become tricky. Some providers completely reject net neutrality. In the future, they want to transfer data on their networks with different quality guarantees. The main argument is that the expansion of the network's capacity is too expensive and, if so, can only be financed by increasing the fees. The other side fears that companies could exploit the lack of network neutrality. (Nearly-)monopolies could be created or strengthened by paying Internet service providers with the appropriate funds to prioritise their own content during transmission.



Visualization: Imagine that you receive different parcels from different merchants every day. The parcels correspond to your data volume and the shops to web-based service providers. All parcels are delivered by one and the same supplier - the Internet provider.

The reduction of net neutrality could mean that you get some packages from some merchants later, because your supplier negotiates different delivery conditions with the shops without you being able to influence it. If the dealer and the supplier do not agree, you will not even get the packages you want. Also a new shop can get difficulties. Namely, when investments are necessary for the transfer of data that a new and perhaps still small retailer can't easily handle.

By the way, the preferential treatment of selected services is already a reality today: if you use T-Mobile, you can't use Skype on the iPhone at all or only under difficult conditions. Other services are also preferred by providers today. Even with Vodafone, the data traffic of certain services is sometimes not included in the inclusive volume of mobile phone tariffs.

What does this mean in practical terms for you and your company? It's simple. Companies like us, young companies based on the premise of free Internet access and equal treatment of data, may find it more difficult to meet your demand in the absence of net neutrality. The Internet could become the new city centre: No matter in which city you arrive, chains and always the same branches in the same presentation set the tone. Individuality is lost. If you yourself want to offer online services as part of the digitalisation, this can also directly and immediately affect your business model.

How does net neutrality protect your own business model?

Net neutrality prevents a "two-class-internet" and forces providers to treat data streams equally. This protects you as an Internet user and also your company, no matter what industry you are in:

  1. If your business model is based on a website as an advertising tool or sales channel, net neutrality prevents a market player from gaining an unfair advantage by paying an Internet provider for preferred bandwidth. Companies can therefore only gain an advantage by offering a product that offers better performance for their customers with the same bandwidth available to all market players.
  2. Just as net neutrality protects your own website or application, net neutrality also preserves a level playing field for all companies where you may be a customer. Do you use an online shop developed by external service providers or the Amazon platform? Then you are protected by net neutrality against this provider being disadvantaged in its performance or being played out by price wars to conquer advantages. Your service remains unrestricted and you are spared the costs associated with a change of provider.
  3. Net neutrality also protects you in the position of the customer in relation to your Internet provider. On the one hand, your provider cannot force you into more expensive tariffs with preferential treatment of your data transmission compared to competitors. Nor can the transfer of your data be artificially slowed down by your provider in order to get more money out of your pocket for an upgrade.

Net neutrality remains a topical and exciting topic, which we will keep a close eye on for selfish reasons. What do you think about this topic? Write us on Twitter @nordantech.

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